Distressed Solutions: The Restructuring & Insolvency Podcast from K&L GatesEpisode 4 – USA Gymnastics: A Brief Overview of the Bankruptcy IssuesClick here to listen to this episode.In 2016, Rachel Denhollander and another former gymnast revealed that they had been sexually assaulted by Larry Nassar, a doctor working with USA Gymnastics. Since then, there have been over 250 identified victims of Doctor Nassar. Those claims have resulted in several high-level departures from USA Gymnastics, including the CEO and the replacement CEO. The U.S. Olympic Committee began decertification proceedings. Several sponsors have discontinued their relationship. USA Gymnastics is in a tailspin, and is looking to Chapter 11 for a solution. Our podcast will discuss the pros and cons of the bankruptcy filing, and some issues that USA Gymnastics may have to face as the case moves forward.Click here to view this episode’s downloadable material.

The Restructuring & Insolvency Group at K&L Gates prides itself on finding solutions for our clients who are facing all kinds of financial distress. Sometimes the client itself is in distress; more often, it has a customer, vendor, borrower, acquisition target, or a portfolio company that is. Our attorneys help clients find the best solutions for each and every one of these situations that minimizes downside risk and maximizes potential upside. This podcast will showcase those practitioners and how they have helped solve these problems.

There was an Echo for your car, an Echo subwoofer, an Echo microwave, and an Echo Clock. Plus, Amazon revealed redesigned versions of the more mainstream Echo Show, Dot, and Plus.

There are now so many Echo devices, it’s almost impossible to count them — and seemingly even harder to pick the right one for you.

But even though Amazon makes plenty of solid Echo devices to choose from, there is actually one option that will suit most people just fine: the Echo Dot. It may seem like the most basic option in Amazon’s lineup, but there are plenty of reasons to buy the Dot over some of the fancier options.

Here’s why the Echo Dot is the only Echo you really need:

1. The price

Avery Hartmans

The Echo Dot only costs $50, and Amazon frequently offers promotions on it — for Black Friday, for instance, Amazon was selling the Dot for $24, and for the holidays, it’s on sale for $30.

Compared to Amazon’s other devices, the Dot is crazy-cheap. The standard Echo is $100 (although it’s on sale for $70 right now), the Echo Spot is $130, and the Echo Plus is $150. But there’s no reason to spend that much when you can get a Dot for as lost as $24.

2. The design

The original Dot was a hard, plastic device that had the overall look and feel of hockey puck. But the new Dot adopted the fabric exterior of the standard Echo, giving it a fuzzier, cozier look.

The new design makes the Dot look not only more high-end, but more modern, too, and it should fit into your home’s decor better. Plus, the Dot’s small size means it fits well into nearly any space in your home — your bedside table, your kitchen counter, your bathroom…you name it.

3. The functionality

Stephen Brashear/Getty Images

Perhaps the most important reason to choose the Echo Dot has more to do with what’s on the inside than what’s on the outside.

The version of Alexa that lives inside the Echo Dot is no better and no worse than the Alexa that lives inside the Echo and Echo Plus. The Echo Dot can still answer random questions, make shopping lists, let you know the status of your package, tell you the news and weather, and more. You’re not getting a subpar Alexa just because you buy the less expensive product.

The only area where the Dot may not measure up to other Echo devices is the audio quality. Amazon improved the speakers on the Dot compared to the previous generation, but due to its small size, the sound quality likely isn’t as good as a device like the Echo Plus.

However, the Echo Dot has an ace up its sleeve: It has a standard audio jack in the back, so you can plug in any full-sized speakers you happen to have lying around. You can still talk to Alexa via the Echo Dot, but the sound output will come through your sound system — meaning it’s a good, affordable way to make your existing stereo a little smarter.

That being said, if you’re in the market for high-end audio, and you don’t have your own speakers, don’t buy an Echo anyway. There are far better speakers out there for playing music, audiobooks, or podcasts.

Series B Financings Continue to Show Strongest Valuations
Series B financings recorded the strongest valuation results in Q3 2018, although the average price increase declined from 117% in Q2 to 92% in Q3, while the median price increase was up moderately from 66% in Q2 to 68% in Q3.

Life Sciences Industry Scores Strongest Valuations
The life sciences industry recorded the strongest valuation results in Q3 2018 and the greatest gain from the prior quarter, with an average price increase of 110%, up from 63% in Q2, and a median price increase of 44%, up from 19% in Q2.

The China Syndrome – The Black Swan Pushes Events to the Tipping Point-Maximizing Enterprise Value in the upcoming Crisis
This article has been updated to reflect the present “China Syndrome” and as it relates to the “Black Swan & Tipping Point”. Parts of this article were published by Steven R. Gerbsman and Robert Tillman in May, 2007. To understand the future, one must understand the past and that history is a guide.

Please read, enjoy and “BE PREPARED”.

Best regards,
Steven R. Gerbsman, Gerbsman Partners and Robert Tillman, member of Gerbsman Partners Board of Intellectual Capital

The events in China of the past months have illustrated how completely integrated are the world’s economies. We know that stresses are building in the world and we all see these stresses and imbalances. Based on history, we know that there will be violent and completely unpredictable resets. Nevertheless, we simply cannot predict the specific triggering events or the timing or the exact nature of such resets. As prudent business people, how do we prepare? Two books describe the process of change and our own experience suggests numerous preparatory measures that can be used to anticipate and to manage the unexpected. We have currently experienced one of the best economic times in our country’s history. The stock market, although recently volatile, is at all time highs, unemployment is stabilizing, interest rates are low (although projected higher), money is plentiful and deal valuations are high and getting higher. There are, of course, many worrisome trends: terrorism, excessive government spending, trade deficits, high oil prices, immigration and over the longer term, such issues as an aging population and global warming. Although problems and worries always exist, in historical terms, times are reasonably good.

The big questions for us as crisis management specialists in maximizing enterprise value are:

Will it end?

Yes. Of course. Even fundamentally healthy economies experience frequent and often violent corrections. The current world economy has evolved in many ways over the past decade. All large businesses are international. The primary economies of the world are very tightly linked together. Money is far more liquid and moves around the world with far less “friction” than it did in the past. The pace of technical change continues to increase. Nevertheless, we do not believe that the laws of history, and especially, the laws of human nature, have been repealed.

As always, “The more things change, the more that they remain the same.”

When will it end?

Unfortunately, no one knows the answer to this question. In historical terms, the current economic expansion has continued for a very long time and has survived numerous shocks, including war, a doubling of energy prices and now significant pressure on energy pricing, natural disasters, localized economic downturns, such as the bursting of the sub-prime mortgage bubble and the challenge of Iran, Russia and the Middle East. At this point in time, it appears to be “ripe” for a downturn. On the other hand, inherently unstable situations often persist for far longer than anyone could believe possible. During the 2000 Internet bubble, it seemed to us for quite some that the old rules of business no longer applied and that 25 year-old CEOs knew something us old guys did not know. When the crash occurred, we were relieved to find out that we were not so obsolete after all.

We did, however, underestimate the staying power of technically insolvent companies with broken or non-existent business models. Many of these companies had significant cash on the balance sheet (offset, of course, by significant liabilities) and investors who continued to infuse more cash far beyond the point of reason. Today, there exist immense pools of uncommitted cash, much of it in the hands of entities, such as private equity funds and hedge funds that are subject to minimal regulatory scrutiny and whose operations are obscured from the public view. In addition, the volatility of the dollar against both the Euro and the Pound Sterling makes U.S. assets potentially more expensive and foreign products cheaper. These factors tend to potentially mitigate against an economic downturn. For how much longer they will continue to do so we do not know (and if we did know, we would certainly would not tell).

How will it end?

Fast, hard and unexpectedly. Two recent books shed a great deal of light on the process:

The first book, The Tipping Point by Malcolm Gladwell describes how human behavior causes events to cascade rapidly once a certain critical mass (the “Tipping Point”) has been achieved. Examples in the business world include periodic economic ?panics? and the spread of certain technologies and products, such as personal computers, iPods, cell phones, etc. It is very difficult to predict in advance when the ?tipping point? in any situation will be reached, but history has shown that, once it has been reached, events proceed very quickly.

The second book, The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb describes how highly improbable, and hence unpredictable, events periodically create massive change. The title of the book derives from the observation that the existence of even a single black swan disproves the assertion that all swans are white. Historical examples include the Fall of France at the beginning of World War II, the rise of the Internet and 9/11.

There are many obvious candidates for a “black swan” event that pushes the world economy over “the tipping point” into a downturn – a war with Iran, a nuclear terrorist attack or a worldwide bird flu or small pox epidemic, but generally, it is what you do not see that gets you. We are fundamentally optimists about the long-term prospects of the world economy. In many highly measurable ways, the world really is improving, driven by technological innovation, a lowering of barriers to trade and increasing economic integration. Nevertheless, we are old enough to have lived through many “bumps” along the road and know that such discontinuities will always occur. We believe that we will see a significant economic event sometime over the next 12-18 months, either localized to a particular sector or geographic region or globally.

Our Advice?

Before such an event occurs:

As a board member, investor or stakeholder:

Implement tight cash flow, receivables and inventory reporting so that you are alerted to problems early.

Focus on the control, preservation and forecasting of CASH on a weekly, monthly and quarterly basis.

Require “bottoms up” forecasting for all aspects of revenue and expense. Have the CEO and CFO defend ALL numbers.

Hold the CEO responsible and accountable for Performance. If you are off the business plan/forecast, re-forecast based on the reality of “what is” today.

Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.

Utilize professional resources to assist in maximizing enterprise value, when appropriate.

When such an event occurs:

Face up to reality and act quickly. When things are going bad, waiting seldom improves them. We have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.

Call for assistance early. The earlier professionals can get involved in the process, the better the potential outcome in maximizing enterprise value. Many times boards request assistance only after a company has run out of cash. Many more options exist to maximize enterprise value if a company has some running room.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 103 technology, medical device, life science, digital marketing/social commerce, cyber and data security, media and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $ 2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Boston, Orange County, McLean, Washington DC, Europe and Israel.

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various balance sheet issues for their technology, life science, medical device, cyber security, solar and cleantech portfolio companies.

These companies were not necessarily in crisis, but had cash (in some cases significant cash reserves) and/or investor groups that were about to provide additional funding. In order to stabilize their Go-Forward-Plan and maximize cash resources for future growth, there were specific needs to address Balance Sheet and Contingent Liability issues as soon as possible.

Some of these areas where Gerbsman Partners has assisted, these companies have been in the process of termination, restructuring and/or reduction of:

Gerbsman Partners was the “innovator” in creating strategies to terminate or restructure prohibitive real estate leases and senior and sub-debt obligations.

To date, we have terminated or restructured $810 million of such obligations for private and public companies, and which has allowed them to return to financial viability.

Accounts/Trade Payable Obligations

Companies in a crisis, turnaround or restructuring situation typically have account and trade payable obligations that become prohibitive for the viability of the company on a go-forward-basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize value based on the reality or practicality of the situation.

Software and Technology-related Licenses

As per the above, software and technology-related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant, successful track record in these areas.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 103 companies in a wide and diverse spectrum of industries. In the process, GP has successfully restructured/terminated over $810 million of real estate executor contracts and equipment lease/sub-debt obligations, and has assisted in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington DC, McLean VA, San Francisco, Orange County, Europe and Israel.

Series B Financings Continue to Show Strongest Valuations
Series B financings recorded the strongest valuation results in Q3 2018, although the average price increase declined from 117% in Q2 to 92% in Q3, while the median price increase was up moderately from 66% in Q2 to 68% in Q3.

Life Sciences Industry Scores Strongest Valuations
The life sciences industry recorded the strongest valuation results in Q3 2018 and the greatest gain from the prior quarter, with an average price increase of 110%, up from 63% in Q2, and a median price increase of 44%, up from 19% in Q2.